Displaying items by tag: Boral

Australia: The Queensland Supreme Court has ruled that Wagners must meet lower prices offered by a competitor in the market in its cement supply contract with Boral. Wagners suspended its supply of cement products to Boral for six months in early 2019 when Boral said it found cheaper cement from Cement Australia, according to the Australian newspaper. However, the court found that an October 2019 pricing notice for cheaper supplies from Cement Australia was ‘valid and effective’. Boral will continue buying cement from Wagners until 2031.

US: David Mariner plans to step down as president and chief executive officer (CEO) of Boral North America at the end of May 2020. He then plans to leave Boral altogether at the end of June 2020 following a decade with the company. Darren Schulz, currently the president of Boral Roofing North America, will become the acting president and CEO until a successor is appointed. The final decision on a permanent head for Boral North America will be made by Boral’s new CEO and managing director. However, the board of Boral is also looking for a new CEO, following Mike Kane decision to retire earlier in 2020.

Australia: Boral has announced a planned three-week shutdown of the kiln at its 1.5Mt/yr integrated Berrima plant in New South Wales. The Financial Review newspaper has reported that Boral chief executive officer (CEO) Mike Kane said, ‘Revenues are down by 6% year-on-year in Australia in the first four months of 2020.’ He added that Australian cement volumes in the same period fell by 16% year-on-year and that there are fewer new orders than at the same stage of 2019 as a result of the coronavirus outbreak.

US: Boral North America has fully or partly suspended operations at four plants and made more than 1700 of its 6900 employees redundant. The Financial Review newspaper has reported that Boral North America chief executive officer (CEO) David Mariner will resign at the end of May 2020.

Australia-based Boral predicted a 3 - 5% year-on-year decrease in net profit in the first half of 2020. Boral chief financial officer (CFO) Ros Ng said, “Boral had US$839m of cash and undrawn liquidity at the end of April 2020.” The group announced a reshuffle of its debt facilities on 15 May 2020.

Australia: The New South Wales Environment Protection Authority (EPA) has issued a US$9800 fine and a clean-up order to Boral for damage caused by a discharge of slurry from its Maclean concrete plant. The Daily Examiner newspaper has reported that a member of the public alerted the body to the spill, which issued from a storm drain into the Clarence River, on 15 October 2019. EPA north regulatory operations director Karen Marler said that the slurry ‘appeared to have been discharging from the Boral plant for some time prior.’ She said, “Subsequent EPA inspections confirm the clean-up and actions taken to improve plant operation were effective.”

Australia: Boral has seen a 40% decrease in its profit during the first half of its fiscal year a period that ended on 31 December 2019. Its profit fell to US$90.4m for the period from US$151m a year earlier. Boral said that this was due to higher costs and weak housing activity in Australia and South Korea. It was also affected by the costs of transactions between its USG-Boral joint-venture partner USG and Knauf, which bought USG in 2019, along with its interest in USG-Boral.

Australia: National press in Australia has reported that the Irish building materials giant CRH has approached Boral regarding a possible takeover. CRH snapped up US$6.5bn of assets from Lafarge and Holcim in 2015 following their merger to become LafargeHolcim, and it consequently became the third-largest building materials supplier by market value internationally.

The speculation comes amid market expectations that Boral could be broken up if a takeover does not unfold soon. Suitors have looked at Boral before but a deal has never eventuated. The company’s market value is US$3.9bn, so it could be within the grasp of a cash-rich strategic player or private equity firm from overseas. Three years ago Boral was worth more than US$4.8bn.

Meanwhile, Australia's devastating recent bushfires have affected Boral’s Berrima plant in New South Wales, likely leading to lower production and margins. This was due to extended leave for staff and road closures.

The Australian cement supply spat calmed down a little this week with the announcement that Wagners Holdings has agreed to resume the supply of cement products from its Pinkenba grinding plant in Brisbane to Boral. Legal proceedings are still on-going with a trial date set at the Supreme Court of Queensland in late November 2019.

The argument blew up publicly in March 2019, when Wagners said it had suspended its cement supply to Boral for six months. Wagners has a cement supply agreement with Boral whereby it supplies cement on an annual basis for a fixed price. However, Boral informed Wagners that it had found cheaper cement from a ‘long established’ supplier in South East Queensland. Local press speculated that this ‘long established’ supplier was Cement Australia, the joint venture between LafargeHolcim and HeidelbergCement. Wagners then had the choice to either match the lower price or suspend its supply. The disagreement took the legal route as the parties failed to reach an agreement. Wagner says that its cement supply agreement with Boral ‘remains binding on both parties’ until 2031.

Wagners later reported that it expected the suspension to cost it around US$7m in 2019. The deal with Boral constituted about 40% of its cement sales volumes. Its overall revenue grew year-on-year in its 2019 business year to the end of June 2019 but its cement sales volumes fell. Its earnings also fell. This was blamed on higher activity in lower margin areas such as contract haulage and fixed plant concrete, and delays in major infrastructure project work in South-East Queensland.

Boral, meanwhile, suffered from falling revenue and earnings from its Boral Australia subsidiary in its financial year to June 2019 due to a slowing construction market. Notably, its cement sales revenue rose by 7% due to ‘favourable’ pricing, higher volumes and cost-saving programs. It didn’t say whether the cost cutting included sourcing cement from a different supplier! All of this though was counteracted by lower contributions from its Sunstate joint venture (JV) with Adelaide Brighton and higher fuel and clinker costs.

All of this is fascinating because these kinds of disputes usually remain out of the public eye. The large size of Wagners’ cement supply deal with Boral meant that when it was threatened it likely had to tell its shareholders due to the potential financial impact. Whether Boral can wriggle out of the contract is now a matter for the courts.

The broader picture is that even though Boral Australia’s cement division seemed to be growing in its 2019 financial year it was still trying to reduce its costs in the face of a decelerating construction market. Added to this, the companies hold both a supplier and a competitor relationship. On the production side Boral operates an integrated plant at Berrima in New South Wales (NSW), a grinding plant at Maldon, NSW and another grinding plant in its Sunstate JV at Brisbane, Queensland. Wagners runs its own grinding plant at Pinkenba, Queensland. Both companies operate concrete plants. This is not unusual for a concentrated industrial sector like cement but it creates problems for the regulators. Note that, also this week, the Australian Competition and Consumer Commission was reportedly paying attention to the links between Barro Group and Adelaide Brighton. Barro owns a 43% stake in Adelaide Brighton but the authorities are concerned about a possible overlap in the two companies’ roles as suppliers of cement, concrete and aggregates. Any slowdown in construction in Australia seems likely to heighten these kinds of issues.

Australia: Wagners Holdings announced on 23 October 2019 that it will resume the supply of cement products to Boral at an undisclosed price following the suspension of deliveries due to a collapse in relations in March 2019. The companies are due to meet in court in late November 2019.

Australia: Boral has suffered a decline in full year net profits of 38% to US$184m. This comes following USG-Boral’s statement regarding substantive changes to its gypsum dealings with Knauf.